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Buying a Bankrupt Business

A friend of mine was dealing with a similar situation. He was looking for a larger facility for his business and found one that was headed into foreclosure or bankruptcy. He offered the owner full appraisal value of the business. The owner refused the offer. And, counter with an offer that was $250,000 more than the appraised value of the property.

My friend finally tired of trying to work with the owner of the facility and went directly to the bank that held the loan. He made a deal with the bank to take over the original loan if the current owner insisted on getting more for the facility then it would bring on the open market.

---The older we get, the more excuses we make for not chasing after our dreams. But truth is, goals are attainable at any age.

A friend of mine has majorly mismanaged his business and is in the middle of some pretty big litigation (regarding debt collection) and has a large amount of debt overall. Additionally, he has built a business that has a bad name in the community and is pissing off the few customers they have. It's a failure, in all senses.

I have the same type of business and a long history of experience in the industry. I have managed to build a somewhat successful business in a different market, but doing basically the same thing. I see what he is doing wrong, and I know how to fix it. I've even tried to explain the problems he has, but he just doesn't have the ability or experience to fix the problems.

I'm trying to develop a way for him to go into bankruptcy and me acquire the business. I would rebrand and fix the internal issues that are the root of the problem -- basically duplicate what my business does already, but in a new market.

So, the first step is going to be to discuss this with a bankruptcy attorney of course. But, does anyone have any ideas on how a deal like this could be structured? I wouldn't mind leaving him with a restricted, minority equity position in the new entity. In fact, that's probably the only thing that would make him go through with it -- if he knew on the other end he would still have some ownership of the new organization.